Oil prices drop over 3% as trade tensions fuel recession fears

April 07, 2025 (MLN): Oil prices slid more than 3% on Monday, extending last week's losses, as escalating trade tensions between the United States and China stoked fears of a recession that would reduce demand for crude.

Brent crude futures decreased by $1.79, or 2.73%, to $63.79 per barrel. 

West Texas Intermediate (WTI) crude futures fell by $1.68, or 2.71%, to $60.31 per barrel by [11:35 am] PST.  

Oil plunged 7% on Friday as China ramped up tariffs on U.S. goods, escalating a trade war that has led investors to price in a higher probability of recession. Last week, Brent lost 10.9%, while WTI dropped 10.6%.

"It's hard to see a floor for crude unless the panic in the markets subsides," said Vandana Hari, founder of oil market analysis provider Vanda Insights.

It's hard to see that happening unless Trump says something to arrest snowballing fears over a global trade war and recession," she added.

Responding to U.S. President Donald Trump's tariffs, China said on Friday it would impose additional levies of 34% on American goods, confirming investor fears that a full-blown global trade war is underway.

Imports of oil, gas and refined products were given exemptions from Trump's sweeping new tariffs, but the policies could stoke inflation, slow economic growth and intensify trade disputes, weighing on oil prices.

Federal Reserve Chair Jerome Powell said on Friday that Trump's new tariffs are "larger than expected," and the economic fallout including higher inflation and slower growth likely will be as well.

Adding to the downward momentum, the Organization of the Petroleum Exporting Countries and allies (OPEC+) decided to advance plans for output increases.

The group now aims to return 411,000 barrels per day (bpd) to the market in May, up from the previously planned 135,000 bpd.

"This potential influx of supply, reversing cuts maintained over the past two years, represents a major shift in market dynamics and acts as a significant headwind for prices," said Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi-based research firm.

Over the weekend, top OPEC+ ministers stressed the need for full compliance with oil output targets and called for overproducers to submit plans by April 15 to compensate for pumping too much.

On the geopolitical front, Iran on Sunday rejected U.S. demands that it hold direct nuclear talks or face strikes, as Reuters reported.

Russia claimed to have captured Basivka in Ukraine's Sumy region and said its forces were attacking multiple nearby settlements.

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